Can Environmental Regulations Achieve A Win-win Situation For Enterprises To Reduce Pollution And Increase Efficiency

Based on the background that China has transformed the emission reduction target of major pollutants from an"expected target"to a"binding target"in the Eleventh Five-Year Plan,this paper systematically examines whether environmental regulations can achieve a win-win situation in terms of"pollution reduction"and"quality improvement"by using data on Chinese industrial enterprises,enterprise pollution data and enterprise patent data,and conducts an in-depth analysis of their impact mechanisms.The study found that:（1）the binding pollution control policies of local governments during the Eleventh Five-Year Plan period effectively reduced SO₂emissions,but did not improve the TFP of enterprises,and this result still holds after a series of tests including parallel trend test,robustness test,placebo test and endogeneity test.（2）The analysis of the mechanism shows that environmental regulations have led firms to strengthen front-end and end-of-pipe pollution control,including optimizing the structure of energy use,installing more pollution treatment facilities and improving pollution treatment capacity,and adjusting output,etc.These pollution control measures are effective in reducing SO₂ emissions,but also increase the costs of firms,resulting in"compliance costs".In addition,environmental regulations also stimulate technological innovation,but the"innovation compensation effect"does not compensate for the increased costs of pollution control,thus inhibiting total factor productivity growth.（3）Heterogeneity analysis showed that:firms facing more relaxed financing constraints experienced a significant decline in SO₂ emissions,but not in firm total factor productivity,indicating that relaxed financing constraints helped mitigate the negative effects of environmental regulations on firms;in addition,binding pollution control policies had better emission reduction effects on firms in high-pollution industries and firms in regions with less financial pressure.The research in this paper provides useful insights into the efficient and precise implementation of environmental policies and helps enterprises’green transformation.